Stocks appear vulnerable to test and maybe even break the lows seen toward the end of August, closely followed market watcher Jim Paulsen said Tuesday, as the Dow Jones industrial average plunged about 200 points on the open.

"I think at a minimum we go challenge the old lows we had set on the initial crash," the chief investment strategist at Wells Capital Management told CNBC, referring to Aug. 25 when the Dow sunk to 15,666 and the S&P 500 fell to 1,867.

"My best guess is we break those maybe and head down towards 1,800-ish [on the S&P] or that level before we finally scare everyone entirely, and maybe finally find a bottom in this correction," Paulsen said on "Squawk Box." The S&P at 1,800 would represent a nearly 8.5 percent drop from where the index closed Monday at 1,966.

"The things we're going to have to face going forward now that we're at full employment, and have interest-rate and maybe inflation pressures, I think we're going to need a lower valuation and a more cautious sentiment among investors," he continued. "I'm not sure we're there yet."